Employment 10% Below Where It “Should Be”

There is always danger is using trendlines as an analysis of what things “should” do, because past performance may not entirely reflect future situations. But I thought the below was incredibly striking.

My first response was… “WOW! That looks bad!”

My second response was “I wonder if the demographics of the baby boomer generation retiring is reducing the size of the labor pool enough to account for this.”

So I did a little more Googling, and said “Nope, it’s not demographics, it really is this bad!”

Perhaps we’ve finally “entitled” ourselves into a European lifestyle (with its attendant unemployment).

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Brent

I think it’s a bit premature to come to the conclusion that our high unemployment isn’t primarily cyclical in nature. Or maybe I’m just reading too much into the last line in your post. The employment situation is quite grim whether it’s structural or cyclical in nature since it looks like it’s going to be flat for quite a while.

My personal belief is that what should be a cyclical downturn is becoming more and more structural every time government creates disincentives to work (taxes, regulations, welfare state benefits). The healthcare bill ratchets us another step down that road.

I don’t think our employment situation needs to be a structural change, but if we keep emulating Europe, it will do so.

Procopius

I don’t understand why you would think this downturn “should” be cyclical in the first place. It’s not a typical inventory recession to begin with.

Also, when you speak of our “employment situation should be a structural change” are you implying that central planning of employment is the only path to stay on, or a forgone conclusion, or both, or neither?

http://thelibertypapers.org/ Brad Warbiany

Procopius,

Actually, it’s pretty simple.

Things should remain within historical trends unless there’s a good reason for them to deviate.

Thus, unless something *big* has changed, all employment shocks would be cyclical, and return to historical trends.

Arguably, the very existence of the internet and cheap communications might be enough of a reason for them to deviate, as the “proximity” value of labor has diminished significantly. This makes it easier to substitute cheaper labor overseas in jobs where it wasn’t possible to do so in the past.

Another potential reason for structural changes, of course, is government getting in the way of labor, making it more expensive. High taxes, onerous regulations, and the need to fund a welfare state artificially raise the cost of labor in the US, making it more likely that jobs will be outsourced — i.e. a structural change to employment.

I’m somewhat confused by your second question (I realize my wording is unclear in my last sentence). Essentially my position is that government should try not to cause structural impediments to work. I’d say that it’s probably a foregone conclusion, though, as America seems to be racing to vote its way to Euro-style Democratic Socialism. I’m implying that this path is a bad one, but that we’re probably going to tread it anyway.